FED’s monetary base … quick update

In January we reported the following: https://caldaro.wordpress.com/2012/01/30/feds-monetary-base-update/. The FED’s monetary base did make a new high, in February at $2.753 tln, but appears to have ended well short of our $3.0 tln expectation. Since then the monetary base has contracted by nearly $100 bln. The recent high, in OEW terms, may have completed Primary wave III. This would suggest the base in now contracting in a Primary wave IV.

During the FED’s monetary expansion policy, each labeled peak has generally coincided with a stock market peak and followed by a correction. We anticipate the market will continue to follow this relationship. While QE 1 and QE 2 greatly expanded the monetary base, Operation Twist has done very little in that regard. Currently we do not see a need for a QE 3. The economy appears to be expanding again with the WLEI at 51.0%, and the PCE remains above the 3% threshold.

Europe, however, initiated LTRO 2 in December 2011. This program ended in late February, and the ECB’s balance sheet now exceeds that of the FED. Should europe’s sovereign debt problem head into crisis mode again a LTRO 3 is likely. For now it looks like the stock markets are on their own for a while as the Secular deflationary cycle continues.

To review all of our public charts please use the following link: http://stockcharts.com/public/1269446/tenpp

About tony caldaro

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24 Responses to FED’s monetary base … quick update

  1. Pingback: Monetary base … quick update | the ELLIOTT WAVE lives on

  2. cwallace90 says:

    Tony, Couldn’t This unfold in a Primary A-B-C as well. with wave 5 of C just completed.


    • tony caldaro says:

      no Chris, No five waves up from 2009.

      Love oneself, or love oneself and all others. It’s a choice. Your future depends on it. Time is short. Make the choice!


      • cwallace90 says:

        that doesn’t rule out an ABC IMO. Even though zigzags are supposed to be 5-3-5, this is not a traditional financial market.


      • cwallace90 says:

        not referring to time period. referring to type of market. The monetary base is not an auction based market. it is directly controlled by the FED. And if you’re goin to say that no clear 5 waves up from 2009 means its not a wave A, you would think its certainly. not a wave 1 yet you label it that way. all I am saying is you claim to be objective, and if that is the case you would label it A/1, not just 1.


  3. makiori says:

    Hello Tony,
    I appreciate that we are in “uncharted territory” because we never had before such monetary expansion ( explosion is possibly a more appropriate word) and also because I think it is the first time that someone is trying to objectively analyze this type of monetary explosion with a elliott approach, however do you think that the rule of alternation could be seen here too?
    wave II looks small/flattish…
    thank you


  4. piazzi says:

    the current low-to-low intermediate cycle of S&P has stretched beyond its historical average duration and, as such, it makes it tricky to come up with a timing window. But the trading cycle is still on its way within its historical average norms and a trading cycle low is theoretically due between April 10 and May 1. The question is whether next trading low would coincide with the intermediate cycle low as well or not.

    As for price behavior, every intermediate cycle has taken at least 3 weeks top-to-low (we are in week 3 from the top so far), and has at least touched 13-wk EMA, which index nicely did today.

    Since index is at 34-wk EMA and another widely watched 55-day EMA, a bounce may be in cards soon. We’ll see how it bounces to gauge probability of a trading low being in and also the probability of a trading low coinciding with an intermediate low

    This is a world that runs on liquidity and not much more. It does not matter who provides that liquidity and how, but it must be provided. Last round it was provided by ECB and that’s why we saw such a good run despite relatively modest Fed expansion

    It really does not matter who prints as long as somebody prints and that print is accepted as a medium of exchange for goods and goodies


  5. vorfahrt says:

    Thanks for the update Tony. I need a brief flight to safety to refi my mortgage. Looks like it is happening. Joe


  6. liborval says:

    if markets are on their own and that would mean correction say 100 points on SPY and duration 1 month does it mean that FED has to expand monetary base before next leg up and has to do it in 1 months or 3 weeks (if correctin started last week) or we can go up without QE3, LTRO 3?


  7. M1 says:

    (….possible support)


  8. M1 says:

    Very interesting, Tony.
    So do we have a possible at the major wave 2 at 1983 ? …. what do you think this could mean for Gold, Oil, USD and stocks ?


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